Insights from BCC Research

Rare Disease, Drug Repurposing Markets Poised for Growth

Biopharma “merger mania” was predicted to maintain its momentum into 2016 (see 2016: Merger Mania, Debate Over Drug Prices to Continue). Validation is coming right out of the gate, with Shire plc’s $32 billion buyout of Baxalta, Inc. Following a six-month courtship, Baxalta said “I do” this week to Shire’s proposal. The combined company will become the world’s biggest maker of drugs for rare diseases and is predicted to generate more than $20 billion in sales by 2020.

The global drug market for rare diseases is projected to reach $191 billion in 2019, reflecting a five-year CAGR of 9.2% (data from BCC Research). According to the World Health Organization, rare diseases are those affecting fewer than 6.5 people of 10,000 in the general population. Drugs used to treat rare diseases are called orphan drugs; rare diseases are also referred to as orphan diseases. There are approximately 7,000 different types of rare diseases and disorders, with more being discovered every day. The United States and Europe each have approximately 30 million people living with rare diseases; it is estimated that 350 million people worldwide suffer from rare diseases (Global Genes). And, according to the Kakkis EveryLife Foundation, 95% of rare diseases do not have a single FDA-approved drug treatment.

UNMET NEED, MARKET ENVIRONMENT FOR RARE DISEASE DRUGS

There’s a case to be made for focusing on development of therapies for rare diseases. “Non-orphan” drugs face the highest competition when their patents expire. Orphan drugs, on the other hand, are less susceptible to patent expirations and continue to maintain their position due to their market exclusivity. Thus, the high economic value of orphan drugs extends beyond their patent expiration, and when coupled with less generic competition, acts as a booster for the orphan drug industry.

In addition, orphan drugs are priced at a premium due to the associated R&D, the advanced technologies involved, and the required manufacturing processes. Orphan drug premium pricing paves a way for companies to commercialize the product and thus address the unmet needs of the small populations. This, in turn, acts as an impetus for more and more pharmaceutical and biotech companies to get involved in the orphan drug industry. Another incentive is that, last year, the FDA approved 21 new orphan drugs to treat rare diseases—47% of all novel drugs approved for the year, according to the National Organization for Rare Disorders.

Shire won over Baxalta by adding cash to sweeten its takeover bid; Baxalta rebuffed an unsolicited $30 billion all-stock bid in July. In addition to boosting its position in the market for rare disease treatments, Shire gains Baxalta’s drug Advate, for hemophilia A, which can cost up to $500,000 per year and is well reimbursed by insurers. Shire’s own collection of rare disease drugs includes Cinryze, for hereditary angioedema (HAE). Cinryze is one of the most expensive medicines in the world, costing as much as $630,000 per year.

A SPATE OF RARE DISEASE DEALS

This latest agreement joins a number of other big-ticket deals for rare disease drugs, including additional ones by Shire. In November, Shire bought Dyax for $6.5 billion, expanding its HAE portfolio. HAE is a debilitating and sometimes life-threatening rare genetic disease. In the acquisition, Shire gained DX-2930, a Phase III-ready, fully humanized monoclonal antibody targeting plasma kallikrein. DX-2930 has received Fast Track, Breakthrough Therapy, and Orphan Drug designations from the US FDA and has also received Orphan Drug status in the European Union.

A year ago, Shire forged its biggest takeover to date at the time, a $5.2 billion purchase of NPS Pharmaceuticals—again, to add to its pipeline of therapies for rare diseases. Via the transaction, Shire acquired NPS’ Natpara, a drug for a rare and potentially fatal hormonal abnormality called hypoparathyroidism. Within weeks of Shire’s announcement, Natpara was approved by the US FDA. Prior to that, Shire acquired ViroPharma for $4.2 billion, adding a treatment for a rare swelling disease to its arsenal.

Last summer, in a deal valued up to $1.25 billion, Bristol-Myers Squibb gained the exclusive right to acquire Promedior and its Phase II treatment, PRM-151, a recombinant form of human pentraxin-2 protein. PRM-151 has been granted Fast Track designation in the United States and Orphan designation in the United States and Europe for the treatment of myelofibrosis, and Orphan designation in the United States and Europe for the treatment of idiopathic pulmonary fibrosis.

Also last summer, Amicus Therapeutics made a deal to pay up to $847 million for rare disease company Scioderm. Amicus, which also focuses on rare and orphan diseases, picked up Scioderm’s Phase III treatment, Zorblisa, for epidermolysis bullosa (EB), a rare pediatric disease. Zorblisa has US FDA Breakthrough Therapy designation on the basis of positive Phase II data. Zorblisa is a topical cream that could potentially be a first-to-market therapy for EB.

Last spring, Alexion paid $8.4 billion for Synageva BioPharma, which had no drugs on the market. In the transaction, Alexion acquired Kanuma, which is now approved in the United States and Europe for the treatment of lysosomal acid lipase deficiency, a very rare enzyme disorder. Alexion Pharmaceuticals’ drug Soliris, which is used to treat a rare blood disorder called paroxysmal nocturnal hemoglobinuria, has a list price of more than $500,000 per year.

DRUG REPURPOSING OFFERS TREATMENTS FOR RARE DISEASES

The strategy of drug repurposing examines whether a compound or biologic developed to treat one condition is safe and effective for treating other diseases. The most popular example is sildenafil, which was repositioned from a treatment for angina to one for erectile dysfunction. Sildenafil has also received orphan drug approval for pulmonary arterial hypertension. Drug repositioning greatly reduces development costs and time (the repurposed drug has already cleared safety screening), improves return on investment, and facilitates the rescue of previously failed compounds.

Drug repurposing has immense potential to find cures for rare diseases. A common example of a repurposed drug approved for a rare disease indication is Alexion’s Soliris, which is approved for atypical hemolytic uremic syndrome and also for paroxysmal nocturnal hemoglobinuria, as mentioned above. The increasing incidence of rare diseases, combined with the need for novel and effective therapies to treat them, comprise a driving force for the drug repurposing market.

Drug repositioning can also reduce the productivity gap of the traditional drug development model. BCC Research studied the future direction of drug repurposing as an important change in the process of therapeutic development. According to BCC’s analysis, the global market for drug repurposing will grow from nearly $24.4 billion in 2015 to nearly $31.3 billion by 2020, with a five-year CAGR of 5.1%.

PwC's Health Research Institute dubbed 2016 the year of merger mania. Hopefully, deals the likes of Shire and Baxalta’s can continue to pay it forward with the introduction of medicines for rare, life-threatening disorders.